Systematic and Liquidity Risk in Subprime-Mortgage Backed Securities
Mardi Dungey (),
Gerald Dwyer () and
Thomas Flavin ()
CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University
The misevaluation of risk in securitized financial products is central to understanding the Financial Crisis of 2007-2008. This paper characterizes the evolution of factors affecting collateralized debt obligations (CDOs) based on subprime mortgages. A key feature of subprime-mortgage backed indices is that they are distinct in their vintage of issuance. Using a latent factor framework that incorporates this vintage effect, we show the increasing importance of a common factor on more senior tranches during the crisis. We examine this common factor and its relationship with spreads. We estimate the effects on the common factor of the financial crisis.
JEL-codes: G12 G01 C32 (search for similar items in EconPapers)
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Journal Article: Systematic and Liquidity Risk in Subprime-Mortgage Backed Securities (2013)
Working Paper: Systematic and liquidity risk in subprime-mortgage backed securities (2011)
Working Paper: Systematic and Liquidity Risk in Subprime-Mortgage Backed SecuritiesM (2011)
Working Paper: Systematic and Liquidity Risk in Subprime-Mortgage Backed Securities (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2011-30
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